On March 1, 2018, a revised Voluntary Disclosure Program (VDP) came into effect.
The changes to the VDP tighten the eligibility criteria for taxpayers to access the program and impose additional conditions on applicants. After a consultation period, the Canada Revenue Agency (CRA) released the changed process in late 2017.
Changes to the VDP affect disclosures under both streams of the program:
- Income tax
- GST/HST and other indirect taxes
This article analyzes changes to the VDP for the stream relating to the GST/HST and other indirect taxes. To explore the changes to the VDP for the income tax stream, please see “New Voluntary Disclosures Program: Income Tax Stream."
VDP for GST/HST Disclosures: overview
Through the VDP, registrants may apply for relief from penalties and some or all of the interest for disclosures related to GST/HST, excise tax, excise duty, the softwood lumber products export charge and the air travellers security charge. GST/HST disclosures under this program may include:
- wash transactions
- undisclosed tax liabilities
- improperly claimed input tax credits
- refunds or rebates
- unpaid tax or net tax from a previous reporting period
- any other amount not previously reported to the CRA.
To be accepted under the GST/HST Program, the application must:
- be voluntary
- be complete
- involve the application or potential application of a penalty or interest
- include information that is at least one reporting period past due
- include payment of the estimated tax owing.
The CRA will evaluate submissions to the GST/HST Disclosure Program on a case-by-case basis and will consider a number of factors when determining the appropriate VDP program:
- the dollar amount of the disclosure
- the number of years of non-compliance
- the sophistication of the registrant
- how quickly the registrant took corrective action to address non-compliance.
The new rules eliminate the ability to make a disclosure on a “no-name,” or anonymous, basis. In its place, the revised program for GST/HST Disclosures offers taxpayers the option of having preliminary discussions with the CRA on an anonymous basis.
Three tracks for GST/HST disclosures
There are three different tracks that a GST/HST disclosure can fall under:
- General Program
- Limited Program
- Wash Transactions Program.
General Program
The General Program provides relief to registrants who want to correct unintentional errors. If an application is accepted into the General Program, a taxpayer must disclose information on any non-compliance during the four years before the application is filed. Taxpayers may be granted full penalty relief and partial interest relief.
Limited Program
The Limited Program is designed for taxpayers who intentionally avoided their tax obligations and limits the level of relief. Other GST/HST disclosure scenarios that will typically be considered under the Limited Program include, but are not limited to:
- applications where GST/HST was charged or collected, but not remitted, by a taxpayer
- applications by corporations with gross revenue in excess of $250 million in at least two of their last five taxation years, and any related entities.
If a taxpayer's application is accepted into the Limited Program, they will not be referred for criminal prosecution with respect to the disclosure, and gross negligence penalties will not be applied. However, interest relief will not be provided and other applicable penalties will still be applied.
Wash Transactions Program
Disclosures under the Wash Transactions Program track include those where a supplier has failed to charge and collect GST/HST from a registrant who is entitled to a full input tax credit.
If an application is accepted into the program, the taxpayer must disclose information on any non-compliance during the four years before the application is filed. Taxpayers under the Wash Transactions Program will not be referred for criminal prosecution related to the information being disclosed, and accepted applications may be eligible for complete penalty and interest relief.
Making a Voluntary Disclosure
If you are considering making a voluntary disclosure under the Voluntary Disclosure Program for GST/HST disclosures, contact your BDO tax advisor. They can help you and your business navigate the new rules.
The information in this publication is current as of March 7, 2018.
This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact BDO Canada LLP to discuss these matters in the context of your particular circumstances. BDO Canada LLP, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.